|In this essay we studied how Swedish companies that are included in the European Union
Trading Scheme (EU ETS) handle the cost of carbon emissions in their capital budgeting
processes. We especially investigated whether there were any di®erences between the di®erent
sectors included. The results also made it possible to give an indication on the e±ciency of
the EU ETS.
After characterising the EU ETS in Sweden with respect to its relevance for investment
decisions, an analysis model was developed. By applying the model to the results from inter-
views with actors from all sectors, it was concluded that the ¯rms do treat the cost of carbon
emissions in their capital budgeting. The level of sophistication di®ers between ¯rms, but is
generally low. The companies chosen had all among the highest emissions and the general
practice in Sweden could therefore be assumed to be even lower.
Among the actors, the Mineral sector and the Energy sector were found to have the most
sophisticated processes. The former most likely due to the nature of the production processes
and the latter due to previous experience with similar types of derivatives.
In the evaluation of the EU ETS, indicators were found that the allocative e±ciency of
the system can be questioned. On the other hand, the only noticeable negative e®ect was a
price related risk connected to the emission allowances.
|Industriell och finansiell ekonomi
|Carbon emission costs in capital budgeting - The effect of the EU ETS on Swedish companies -
|Göteborg University/Department of Business Administration
|Göteborgs universitet/Företagsekonomiska institutionen